August 10, 2022

Commentary: The Singapore economy in 2020 – stabilisation or more uncertainties on the horizon?

7 min read

SINGAPORE: 2019 has been a roller-coaster ride for financial markets and the global economy including Asia.

Geopolitics has loomed large over business sentiments. 

The year has been driven by US President Donald Trump’s frequent tweets, bouts of market volatility and geopolitical tensions on both the trade and technology fronts, the never-ending drama called Brexit, and much hand-wringing over China’s ongoing growth slowdown, among others.

Despite initial market fears about a US recession, the US economy escaped a contraction. Global central banks, led by the US Federal Reserve, had ridden quickly to the rescue with interest rate cuts and liquidity provisions.

READ: Commentary: Singapore trade, disrupted, (not) business as usual

Hence, notwithstanding the economic uncertainties and bouts of risk-aversion, financial markets still performed fairly well as illustrated by the S&P 500’s continued surge.

At home, the Singapore economy managed to avert a technical recession in the third quarter of 2019, albeit with full-year growth likely to come in at the lower end of the official growth forecast range.


Looking ahead, there are some tentative green shoots on the macroeconomic front, including favourable borrowing conditions and a slightly stronger outlook for emerging markets. 

But we should remain cautious not to count the chickens before they hatch, given that many factors, such as the US-China bilateral relationship, can turn in an instance.

READ: Commentary: The brewing discontent with trade and one step to restoring faith in globalisation

The Singapore economy may eke out modestly improved growth prospects of 1 to 2 per cent year-on-year in 2020, versus a subdued 0.5 to 1.0 per cent forecast range for 2019.

Goods and daily necessities like food arrive on vessels that depend on the work of commercial divers
Global trade growth has slowed in 2019 according to the WTO. (File photo: AFP/Roslan Rahman)

This assumes that the global trade tensions do not escalate further from here and the manufacturing and trade outlook sees a modicum of stabilisation.

Moreover, the challenges ahead for the Singapore economy over the next few years may be more structural and difficult to navigate.

Take for instance, climate change, which has manifested in fires, floods and global warming, and will require significant investments for countries adapting to a changed environment. Prime Minister Lee Hsien Loong had earlier highlighted the need for US$100 billion for the Singapore economy to prepare for rising sea levels at the National Day Rally in 2019.

READ: Commentary: Forget bamboo straws. Let’s name the elephants in the room of Singapore’s climate debate

The greying of the Singapore population with attendant health, retirement and housing planning needs could also strain fiscal resources over the long term.

The rise of the gig economy also poses fresh challenges for policymakers who now have to think about how to strengthen job security, plan for medium-term career development and approach retirement needs for workers in this new economy.


The good news is major economies appear to be navigating global economic headwinds well thus far, although Eurozone growth remains sluggish for now. 

That said, the US is heading into an election cycle and if the impeachment process against incumbent president Trump is any guide, the noise level is likely to remain elevated in 2020.

READ: Commentary: US Senate has huge powers and responsibilities in impeachment trial

In Asia, regional economies are carefully treading the bifurcation of manufacturing supply and trading chains as businesses adopt a “China plus one” approach to avoid US-China trade tariffs.

US President Donald Trump and China's Xi Jinping -- seen here in June 2019 -- started to
US President Donald Trump and China’s Xi Jinping started to redefine one of the world’s most significant geopolitical relationships in the 2010s. (File photo: AFP/Brendan Smialowski)

READ: Commentary: Shocks lined a rather demanding year for Singapore and the global economy

The biggest risk for the Singapore economy remains the fragility of the external environment and the prospect of anaemic global growth amid uncertainties pertaining to US-China tensions beyond trade, Brexit, China’s slowdown, and geopolitical hotspots (such as the Hong Kong unrest) which could continue to weigh on business and consumer confidence.


Sectoral challenges remain mixed for the Singapore economy. The services and construction sectors are likely to provide the bulwark for 2020 growth, even if manufacturing sector stages a modest recovery. 

Manufacturing, especially electronics, has been suffering a global demand slowdown, coupled with the wax and wane of the US-China trade war that has impacted both business and consumer confidence.

While there were tentative signs of a bottoming- out in the middle of 2019, a quick V-shaped upturn remains elusive for now, although there are hopes that the 5G implementation will lend a helping hand going forward. There are also hopes the impending conclusion of a US-China Phase 1 trade deal heralds a more reconciliatory trade relationship.

Still, domestic demand conditions may remain subdued due to the lack of fresh growth catalysts.

The outlook for cyclical industries, like retail, remain challenging due to a combination of supply-side factors like high operating costs including rents and the ongoing manpower crunch, whereas the demand side is likely restrained by potential belt-tightening in households.


The domestic labour market had stayed relatively resilient over the course of 2019.

Although the overall unemployment rate had crept up to a 10-year high of 2.3 per cent, retrenchments for the 12 months to September 2019 was actually lower at 10,490, compared to the same period a year before (11,900) and in 2017 (16,480).

CBD 10
File photo of office workers at Raffles Place in Singapore’s CBD (Photo: Jeremy Long)

Hiring intentions have turned more cautious, which explains in part why resident wage growth for the first nine months of 2019 had come down slightly to 3.3 per cent, down from 3.7 per cent for the same period a year ago.

However, looking ahead, the services sector will have to grapple with the Dependency Ratio Ceiling cut from 40 per cent to 38 per cent from Jan 1, 2020 for the proportion of foreign workers on work permits or S Passes, with a further cut to 35 per cent from Jan 1, 2021.

This may buffer against any softening of the domestic labour market amid an expected lacklustre growth recovery environment in 2020. 

Growth industries likely to offer employment opportunities include healthcare, education services, information and communications (ICT), and finance and insurance.   

The unemployment rate may hover around the 2.3 to 2.5 per cent in the interim, but should avoid the sharp spikes seen in the global financial crisis back in 2009.

The biggest challenge for labour remains keeping up with advances in technology. In the medium term, with the advent of the Internet of Things, automation, and the employment of artificial intelligence, Singapore is expected to see the largest disruption in its workforce among ASEAN countries.

READ: Commentary: Why aren’t there more Singaporean CEOs?

READ:Commentary: The future is tech but where is Singapore’s engineering and IT talent? 

Singapore may see a faster and more widespread digital transformation compared to its ASEAN peers.

Major upskilling or reskilling will be needed for the labour force to stay relevant and fill new jobs created by the Fourth Industrial Revolution. This is likely to remain a key focus for policymakers.


There is space for a stronger fiscal response at the upcoming 2020 Budget, after a more accommodative monetary policy in 2019. Market attention is increasingly focused on what is touted to be a pre-election budget. 

Looking around the region, Singapore would not be alone if it unveils a more expansionary budget. Countries around the region have announced proactive fiscal policy support including China, South Korea, Thailand and India.  

Japan has announced a stimulus package amounting to some 13 trillion yen (S$160 billion), while Hong Kong has announced waves of fiscal packages to tackle its recession.

Hong Kong skyline economy buildings
Residential and commercial buildings in the Kowloon district (foreground) with the skyline of Hong Kong Island past Victoria Harbour in the distance. (Photo: AFP/Anthony Wallace)

Many Singaporeans will look to Budget 2020 for aid for workers and companies.

To better assist displaced workers and SMEs to ride out these challenging times, it may be timely to top up the SkillsFuture Credit scheme from the initial S$500 per Singaporean and offer more work transition support by scaling up the Professional Conversion Programmes.

For SMEs, greater assistance in terms of enterprise capability building, innovation and internationalisation efforts in light of the global trade tensions will be likely.

READ: Upcoming Budget to include ‘practical measures to improve the lives of Singaporeans’, says PM Lee in New Year message

READ: Commentary: The Singapore Budget and Heng Swee Keat’s shift away from Big Government

We should also expect Budget 2020 to reflect a focus on medium-term priorities such as healthcare, education, security (including cybersecurity and food security), productivity improvements and environmental and financial sustainability. 

Budget 2020 may also provide greater clarity on how to fund the S$100 billion to combat climate change.

Aside from any stimulus package to tackle concerns over the state of the economy and measures to support businesses, many will also look to Budget 2020 for support for households.

There had been strong hints of a GST offset package in the offing. Without a specific timeline on the actual implementation of the planned GST hike from 7 to 9 per cent, it may be premature to speculate on the actual quantum of the 2020 GST offset package.

The focus of social programmes will likely target low-income households and seniors and costs of living concerns.

For the new year in 2020, one has to be thankful that many much touted external downside growth risks did not materialise, and look forward with an air of cautious optimism that the global and regional economy will improve from a very volatile 2019.  

Selena Ling is Chief Economist and Head of Treasury Research at OCBC Bank.